Defence spending has often been the cause of bitter arguments among NATO Allies. In today’s worsened security environment, Allies will doubtless need to return to this thorny topic at their July summit in Vilnius.
Despite recent upsurges in defence spending, Europe’s defence capacity, brought into sharp focus by Russia’s war in Ukraine, remains in a sorry state. Decades of underinvestment have finally begun to catch up with the continent: critical capabilities are missing, wartime stockpiles are low, and readiness levels are poor. The western donor coalition will also need to replace at least 30 billion euros’ worth of arms and equipment it has so far (as of November 2022) provided to Ukraine. Ukraine’s reconstruction will need to be funded even as European states continue to struggle to reverse the impact of the war and the COVID-19 pandemic on their own economies. Meanwhile, possible US pre-occupation with China will compel European states to build the means to take greater responsibility for their own security.
The question of defence spending and its perennial companion, transatlantic burden sharing, are sure to be high on the agenda at NATO’s Summit in Vilnius in July. The Allies’ performance against the 2014 Defence Investment Pledge will be scrutinised and there will be pressure, especially from Allies on NATO’s eastern edges, for further growth, and perhaps further concrete commitments.
The table below gathers data on the Allies’ recent defence expenditure and their immediate and longer-term expectations.
|Ally||2014 Defence Expenditure|
|2022 Defence Expenditure|
|2023 Defence Expenditure|
|The Longer Term||Spending Priorities|
|Baykar Bayraktar UAVs, Javelin anti-armour & Stinger anti-air systems|
|Fire support and air-defence capabilities, development & strengthening of military intelligence capabilities, establishment of full cyber command by 2024.|
|Bulgaria||1.31%||1.67%||1.85%||2.00%-2024||Upgrading air-defence capabilities through purchases of 3D radars & air defence systems, drones, multi-purpose submarines, and friend or foe identification technology.|
|Canada||1.01%||1.27%||1.46%||1.51%-2024||F35 fighter jets.|
|Croatia||1.82%||2.03%||NA3||NA||Short & medium range air defence (Mistral surface-to-air missiles, multi-purpose fighter jets), Bradley infantry fighting vehicles.|
|Czechia||0.94%||1.33%||1.52%||2.00%-2024||F35 fighter jets, CV90 armoured vehicles|
|Denmark||1.15%||1.39%||1.50% *||2.00%-2033*||Heavy infantry brigade, surveillance & intelligence capabilities, anti-submarine warfare.|
|Estonia||1.93%||2.34%||2.85%||3.26%-2024||HIMARS launchers, medium-range air defence, joint procurement programme with Latvia to purchase logistical and other vehicles.|
|France||1.82%||1.90%||NA4||2.00%-2025*||Seabed warfare, nuclear modernisation, military intelligence, Rafale fighter jets|
|Germany||1.19%||1.44%||1.50% *||2.00%-2025*||F35 fighter jets, PUMA fighting vehicles, F126 frigates, future combat air system|
|Hungary||0.86%||1.55%||2.00%6*||NA||Strike sensors, military integration, land-based capabilities|
|Italy||1.14%||1.54%||1.5%*||2.00%-2028||Tempest fighter jets|
|Medium range air defence, HIMARS launchers|
|Lithuania||0.88%||2.36%||2.52%||2.52%-3.00%-20238||UAVs, air-defence capabilities, HIMARS launchers|
|UAVs & aerial surveillance, cyber-defence, air transport, intelligence gathering|
|Armoured howitzers, long-range missiles (naval), F35 fighter jets, reaper UAVs|
|North Macedonia||1.09%||1.78%||1.85%*||2.00%-2024*||JLTV & STRYKER armoured vehicles, air defence systems, cyber security|
|Norway||1.55%||1.55%||NA9||NA||F35 fighter jets, military infrastructure modernisation & expansion in northern Norway, expansion of terrestrial vehicles and personnel|
|Poland||1.86%||2.42%||4.00%*||NA||Increasing size of armed forces, K2 battle tanks, K-9 howitzers, FA-50 training and light aircraft|
|Slovakia||.99%||2.00%||2.00%10*||NA||Military trucks, small arms, anti-aircraft systems, armoured infantry vehicles|
|Air transport, increasing personnel|
|US||3.72%||3.47%||3.00%||2.7%-2024||Naval procurement: 11 battle-force ships, and a new destroyer|
|Finland||1.29%||1.96%||2.25%*||NA||F35 fighter jets, small arms, anti-ship & anti-aircraft missiles|
* – Data from secondary source (e.g., media report), rather than from a primary source (e.g., government publication, ministerial communication)
, 2 Figures for 2014 and 2022 defence spending as a share of GDP drawn from NATO’s 2022 Defence Expenditure document.
3 Croatian defence budget is increasing by EUR 40 million from the 2022 budget.
4 French defence spending will raise 7.4% year-on-year increase in spending from 2022 levels in 2023.
5 Greek defence spending will fall from EUR 6.39 billion in 2022 to 5.65 billion EUR in 2023.
6 One third party source claims spending will reach 2.40% of GDP in 2023.
7 Latvian government currently debating large increases in defence spending which might yield a 2.25% defence expenditure for 2023.
8 Lithuania has earmarked additional funding for defence, financed by borrowing, which will bring 2023 defence spending to 3.00% of GDP as long as the overall budget deficit does not exceed 4.9% of GDP.
9 Norway plans a 9.8% year-on-year increase in spending from 2022 levels in 2023.
10 Slovakia has pledged to keep defence spending over 2.00% in 2023; ongoing government debate about budget leaves commitment unresolved.
11 UK defence budget in flux with negotiations ongoing; government has committed to maintaining spending above 2.00% of GDP for 2023.
12 Sweden’s draft budget will increase spending by USD 1.23 billion in 2023 from 2022 levels.
The data clearly indicates substantial growth in defence expenditure across the board in recent years. NATO summarises that “2022 will be the eighth consecutive year of increased defence spending by European Allies and Canada, with a cumulative investment of almost USD 350 billion since 2014.” Almost all Allies expect further, and in many cases quite large, increases for 2023 and beyond, providing some evidence of the game-changing impact of Russia’s war in Ukraine. Moreover, many of their spending priorities, including items such as fighter jets, air defence, main battle tanks and armoured fighting vehicles, point to a recognition of the need to deter, and if necessary, defend against a large-scale, conventional aggression on their territories. The days of the peace dividend are long gone.
Nonetheless, progress has been uneven and halting. There is a clear divide between the figures for western and eastern European Allies, with those towards NATO’s east reporting much larger increases than those to its west. For example, the ten central and eastern European states that joined the Alliance in 1999 and 2004 increased their defence spending relative to GDP by an average of more than 65% between 2014 and 2022, while the corresponding figure for the founding members (excluding Iceland) is less than 20%. Given the scale of the challenge of rebuilding defence against the background of a continuing threat from Russia, it is far from clear that these increases will be sufficient.
Strengthening defence in Europe will require both urgent and sustained investment by the European Allies. Capability building and defence materiel acquisition are multi-year efforts, especially in times when demands on industry are high. But some of the promised defence spending increases are one-off supplemental spending packages, and government spending priorities are, in any case, rarely certain in the longer-term. Commitments made one day may be later reversed. A handful of Allies, including Poland, Lithuania, Estonia, and the UK have thus pressed for a higher defence spending target of perhaps between 2.5 and 3% of GDP to be properly codified at the Vilnius Summit.
The facts that Allies were able to agree on only the most elusive of commitments in 2014 (“aim to move towards the 2% guideline”) and that only 9 of 30 Allies had achieved it by 2022, however, point to the difficulty of agreeing on both the pace and scale of any such commitment. But without at least some form of collectively agreed metrics, there is a considerable risk of defence dropping once again down the priority ladder—until the next time the European states are shocked into action.
Views expressed in ICDS publications are those of the author(s).